2 men charged with fraud in $23M vets' contracts

Jul. 4, 2013 - 01:04PM
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IOWA CITY, Iowa — Two businessmen are disputing an indictment that accuses them of fraudulently bidding for and winning $23 million worth of federal construction contracts in Nebraska and Iowa that were intended for disabled veterans’ businesses.

Ram Hingorani and Ronald Waugh pleaded not guilty in federal court in Des Moines this week to 32 counts, including fraud and money laundering. Omaha-based Midwest Contracting Inc., a company operated by both men but majority owned by Waugh, also is named in the indictment.

According to the indictment, Midwest Contracting bid for and won contracts from the Department of Veterans Affairs and the Department of Defense under a program designed to help small businesses that are at least 51 percent owned and controlled by service-disabled veterans. Federal law encourages agencies to give at least 3 percent of their contracting work to such firms.

Waugh, of Glenwood, Iowa, is such a veteran, having been designated as service-disabled for hearing loss in 2007 and tinnitus in 2008. Hingorani, of suburban Omaha, is not a veteran, and the indictment suggests that he was actually in control of Midwest Contracting.

The indictment alleges that the two men formed the company in 2007 specifically to seek such contracts and that they fraudulently relied on the wounded veterans’ preference to receive 45 contracts for work for the VA in Des Moines and Omaha and at Offutt Air Force Base in Nebraska starting in 2007. Six of the contracts were worth more than $1 million.

Hingorani later transferred large sums of money from Midwest Contracting’s bank account to other assets he controlled, including $1 million to set up an investment account, the indictment alleges. He also used the proceeds to buy 40 acres of land in Sarpy County, Neb., and made a $510,000 payment to Waugh in 2011, it says.

The indictment notes that pass-through companies set up to win contracts are considered illegal under the program and that any joint ventures must be controlled by the disabled veterans’ company.

Leon Spies, an Iowa City attorney representing Waugh and Midwest Contracting, said his client is a Vietnam veteran who was also stationed in Europe and the southern U.S. during a “long and rewarding and valuable career in the military.”

Spies said that the particular details of the government’s allegations have not been fully fleshed out, but that Waugh would vigorously contest them.

“He’s dismayed and looking forward to an opportunity to see himself and his family clear of these accusations,” Spies said.

Holly Logan, a Des Moines lawyer representing Hingorani and his company, Midwest Paving Inc., which also is named in the indictment, said her clients vehemently deny engaging in any criminal conduct.

“They have acted in good faith in all of their dealings with the VA and Offutt AFB, and they were shocked by these criminal charges,” she said. “We believe the indictment in this case is based on incomplete and inaccurate information, and we are confident the truth will come out, at a trial, if necessary.”

She said the 17-year-old company would continue serving customers in the meantime.

Both men have been released from custody pending trial, which has tentatively been scheduled for Sept. 3.

The U.S. Attorney’s Office in Des Moines is seeking a money judgment of $23.4 million. It is also seeking to seize certificates of deposit and bank accounts linked to the men and their companies, as well as the 40 acres of land.